Gas price hedge contingent on force majeure Swiss Re Corporate Solutions rises to the challenge
Article information and share options
As the risk landscape evolves, companies are taking a closer look at their resilience to risk. They are particularly interested in those risks that aren't covered by conventional insurance policies. It was in this spirit that an energy company contacted Swiss Re Corporate Solutions with a view to insuring its exposure to a force majeure event.
The company in question operates a liquefied natural gas (LNG) terminal. It wanted to cede the risk of a force majeure preventing the company from obtaining the gas it is contracted to supply to its clients. As the situation stood, the energy plant would have been responsible for sourcing any missing gas from the market (at market prices). It considered this exposure as excessive.
To establish a targeted solution, Swiss Re Corporate Solutions had to establish comprehensive answers to a number of questions: What is the likelihood of a force majeure event occurring? How volatile is the market price for gas? What is the likelihood of correlation between the two risks (force majeure event and increase in the gas price)?
Having assessed the situation, we offered a two-year policy triggered by a force majeure event at an LNG terminal with a hedge against a simultaneous rise in gas prices. This policy featured a new trigger compared to traditional cover, which is normally contingent on an outage.
By focusing on our client's specific requirement, we allowed them to free up capital and concentrate on their core business. Our business is risk management, and we pride ourselves on managing risk in a way that provides maximum benefit to the client. If your risk exposure is holding your business back, you should contact us. There's no such thing as an uninsurable risk at Swiss Re Corporate Solutions.